WASHINGTON (Reuters) - U.S. home resales surged in September after two straight months of declines as first-time buyers stepped into the market, pointing to underlying momentum in the economy.

While other data on Thursday showed a bigger-than-expected increase in the number of Americans filing for unemployment benefits last week, the trend continued to suggest that the labor market remains strong. Labor market strength is one of the key factors underpinning the housing market.

"Today's reports reaffirm that the jobs and housing markets are moving in the right direction. That's important because the jobs and housing markets are going to be critical to supporting growth in 2017," said Ryan Sweet, senior economist at Moody’s Analytics in West Chester, Pennsylvania.

The National Association of Realtors said existing home sales rose 3.2 percent to an annual rate of 5.47 million units. That was well above economists' expectations for an increase to a 5.35 million-unit pace.

First-time buyers accounted for 34 percent of transactions last month, the largest share since July 2012. Still, the share remains well below the 40 percent to 45 percent that economists and realtors say is required for a robust housing market.

September's strong home sales report came on the heels of data on Wednesday showing a jump in single-family housing starts and overall building permits in September.

The upbeat housing data added to reports on manufacturing and auto sales in suggesting that economic growth picked up in the third quarter after a lackluster performance in the first half of the year. Third-quarter gross domestic product growth estimates are as high as a 2.6 percent annual rate.

But with the supply of houses available for sale remaining low, the rising demand for housing will probably push up prices and constrain future sales.

The dollar rose to a seven-month high against a basket of currencies after European Central Bank President Mario Draghi said the ECB did not discuss ending bond purchases at its latest meeting. Prices for U.S. Treasuries were higher.

SUPPLY CONSTRAINT

The increase in existing home sales last month was broad-based, even as housing inventory remained tight. There were 2.04 million previously owned homes on the market, up 1.5 percent from August, but down 6.8 percent from a year ago.

With supply constrained, house prices continue to rise. That is boosting profits for homebuilders and encouraging them to ramp up construction. PulteGroup Inc (N:PHM), the No.3 U.S. homebuilder, reported on Thursday a 19.2 percent jump in quarterly profit.

The median price of a previously owned home increased 5.6 percent from a year ago to $234,200 last month. At September's sales pace, it would take 4.5 months to clear the stock of houses on the market, well below the six-month supply that is viewed as a healthy balance between supply and demand.

Separately, the Labor Department said initial claims for state unemployment benefits increased 13,000 to a seasonally adjusted 260,000 for the week ended Oct. 15. That marked 85 straight weeks of claims below the 300,000 threshold normally associated with a strong jobs market, the longest such period since 1970, when the labor market was much smaller. Economists had forecast first-time applications for jobless benefits rising to 250,000 in the latest week.

Part of the increase in claims last week could be related to the effects of Hurricane Matthew, which lashed the Southeast of the country, causing severe flooding. The storm could have left some people temporarily out of work.

"It is possible that Hurricane Matthew contributed to the latest increase in claims, but it does not look like this is the only factor causing the recent disappointment," said Daniel Silver, an economist at JPMorgan (NYSE:JPM) in New York.

Unadjusted claims for North Carolina increased 2,520 last week. Outside the storm-affected states, there were hefty gains in unadjusted claims for Michigan, Kentucky and California.

The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose 2,250 to 251,750 last week.

The claims data covered the survey week for October's nonfarm payrolls. The four-week average of claims fell 6,500 between the September and October survey periods, suggesting another month of solid employment growth.

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:

Enrichthe conversation

Stay focused and on track. Only post material that’s relevant to the topic being discussed.

Be respectful. Even negative opinions can be framed positively and diplomatically.

Use standard writing style. Include punctuation and upper and lower cases.

NOTE: Spam and/or promotional messages and links within a comment will be removed

Avoid profanity, slander or personal attacks directed at an author or another user.

Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.

Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

I have read Investing.com's comments guidelines and agree to the terms described.

Disclaimer:Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.